The Swiss Franc is a safe-haven currency. Despite the Russia-Ukraine attack, the Swiss Franc grew stronger as investors show interest in the USD/CHF.
Dollar to Swiss Franc Strengthens as Crisis Grows in Ukraine
USD/CHF is trading at 0.9201, enjoying its position as a safe-haven currency. The Swiss Franc gained more than 100 pips on Monday, February 28, 2022.
The Dollar to Swiss Franc is gaining strength with the increasing political turmoil between Russia and Ukraine. It is a safe-haven currency that investors prefer when the forex market collapses. Investors rush to safe-haven assets like the US Dollar, the Swiss Franc, and the Japanese Yen to protect their investments. Gold is another safe-haven asset for investors.
Currencies across the globe tumble while the Dollar and Franc prices surge higher. The rush for safe investments is high as Russia hits Ukraine. Currency pairs in the foreign currency exchanges are moving lower.
Swiss Economy Slows Down
The Swiss economy slowed down 0.3% in Q4 2021, while it was 1.9% for the previous quarter. The pandemic lowered internal development in the last quarter of 2021. The government brought in partial restrictions and enforced work from home atmosphere to curb the pandemic. The economy deteriorated with the covid infections affecting the economy for two years.
The Swiss GDP in 2020 was at 2.4%, with the covid restrictions affecting trade and commerce. The economy started to recover to 3.7% in 2021. Analysts expect a 3% growth in GDP for 2022.
The State Secretariat for Economic Affairs states that the economy shows recovery at a moderate pace.
However, retail sales year on year picked up from -0.5% to 5.1%. Consumer spending, which is the gauge for the overall economic growth, is good. The pandemic and lockdown restrictions brought down retail sales in 2021, and consumer spending came down as people were forced to stay indoors.
Exports came down 2.2%, while imports of goods grew 1.2% in Switzerland.
Russian Rouble Worst Hit
The USD/RUB currency pair trades at 99.3175 on Tuesday, as the war continues in Ukraine. The Russian Rouble slipped to life lows at 115.4163 on February 28. There is a heavy loss of life and property across both countries. The supply chain disruptions, especially in crude oil and food grains, cause a surge in overall prices. Countries are already facing the problem of high inflation from the pandemic. The increase in crude oil is further affecting the global economy.
On February 25, the USD/RUB weakened from 81 to 105 levels. The Rouble saw a single-day fall of 30%.
The Euro region depends on Russia for its gas supply, and the Russian attack on Ukraine affects the exchange rate of the Euro to Swiss Franc currency pair. Russia is the largest exporter of crude oil, and the supply chain disruption causes a surge in crude oil prices.
The European Union joined hands with the United States to bring strict sanctions on Russia. Russia increased policy rates to 20% to counteract the effect. The US, the UK, and the European Union targeted financial institutions in Russia and brought sanctions on them. The US President Biden blames Russia as the aggressor.
The UN held an emergency meeting on the military developments on Ukraine grounds. But talks are inconclusive.
Ukraine exports wheat and food grains to other countries. Sunflower and wheat are Ukraine’s chief exports, and cooking oil prices are sky-rocketing.
Crude oil prices are moving higher towards the psychological level at $100 per barrel.
EUR/CHF at Multi-Year Lows
The EUR/CHF forex rates are trading at levels last seen in June 2015. The Swiss Franc is at a seven-year high, as it attracts investors as a safe haven currency.
The EUR/CHF currency trading pair dropped 100 pips on Monday and 80 pips on Tuesday, March 1, 2022.
Western countries raised sanctions against Russia. They exempted Russian banks from SWIFT.
High Inflation Hits US Dollar
The US Dollar is trading on the foreign exchange at the 97.000 levels. The greenback moved to 97.73 last week when Russia first entered Ukraine. The covid pandemic, the supply chain disturbance, and the recent Ukraine crisis have brought inflation to a four-decade high in the United States. Analysts predict that the US inflation may touch 3.7% by the end of the year.
One CHF in USD is at 1.09 on Tuesday, March 1, 2022. The Swiss Franc is stronger than the US Dollar. But the US inflation is dragging the greenback lower, while the Franc gains strength in this time of crisis.
The Japanese Yen is another safe-haven currency but did not gain strength as much as the Swiss Franc. It depends on the supply of gas from Russia, and supply disruptions are hurting Japanese production.
Meanwhile, Covid cases in Hong Kong are increasing, and hospitals are running at full capacity.